Swiss Re swings to loss on $3.9bn COVID-19 hit in 2020 but 'confident' on 2021 outlook
Some $3.9 billion of COVID-19 claims/reserves and unusually high natural catastrophes battered Swiss Re’s 2020 results as it swung to a full-year loss of $0.9 billion despite seeing strong underlying performance and reducing exposure to sectors that were vulnerable to the pandemic.
The group's chief executive Christian Mumenthaler and chief financial officer John Dacey struck a tone of optimism and confidence in the outlook for 2021, highlighting the company's strong capital position and favourable market conditions.
The Zurich-based global reinsurer made a net loss of $878 million in 2020, compared with a net profit of $727 million in 2019. Excluding $3.9 billion of pre-tax COVID-19-related claims and reserves, Swiss Re’s net income came in at $2.2 billion.
Group gross written premiums (GWP) rose to $42.9 billion in 2020 from $42.2 billion in 2019.
However, the group’s property and casualty (P&C) businesses were impacted by $1.9 billion losses related to COVID-19 claims and reserves, approximately 80 percent of which represent incurred but not reported (IBNR) reserves for affirmative non-damage business interruption, cancelled or postponed events, casualty and credit & surety losses.
Natural catastrophe losses amounted to $1.7 billion for 2020, largely driven by the Atlantic hurricane season and numerous secondary perils globally. Large man-made losses were dominated by the Beirut port explosion in the third quarter.
The P&C combined ratio was 109 percent in 2020, compared with 107.8 percent in 2019.
Swiss Re stated that its P&C businesses achieved a strong underlying performance on the back of improving market conditions and management actions taken to reduce exposure and focus on portfolio quality. P&C Re renewed contracts with $7.8 billion in premium volume on 1 January 2021, representing an 11 percent volume decrease compared with the business that was up for renewal. It achieved a nominal price increase of 6.5 percent in the renewal round.
The company noted that it expects additional COVID-19-related claims and reserves in P&C businesses of less than $0.5 billion in 2021, based on the current information.
Swiss Re's life and health reinsurance (L&H Re) net profit fell to $71 million in 2020, compared with a net profit of $899 million in the prior year. COVID-19 losses in the business unit amounted to $999 million in 2020, reflecting increased mortality rates in the US and the UK.
Corporate Solutions reported a net loss of $350 million and a combined ratio of 116.5 percent in 2020, compared with a net loss of $647 million and a combined ratio of 127.9 percent in 2019.
The group generated strong investment results with ROI of 3.5 percent due to decisive portfolio management actions to cut exposure to sectors that were vulnerable to COVID-19.
Swiss Re said it prioritised margins over volumes in the January renewals.
Group CEO Mumenthaler said: "Our Group has gone through this crisis with confidence and strength, and in our role as a shock absorber we are doing our part to help mitigate the challenges of the pandemic and improve resilience to future systemic risks.
"While some further COVID-19 losses are expected in 2021, we have dramatically reduced relevant exposures in P&C lines. I am very encouraged by broad-based improvements in portfolio quality and underwriting margins in P&C Re and Corporate Solutions, including in the January renewals."
CFO Dacey added: "Our capital position remained very strong throughout 2020, despite the unprecedented impact from COVID-19 and an unusually high frequency of natural catastrophes. Swiss Re’s businesses continued to run without disruptions, delivering a strong underlying performance. Together with a positive outlook, this allows us to propose a stable dividend payment to our shareholders even in these challenging times."
Commenting on the 2021 outlook, Mumenthaler said: "We are confident in the outlook for 2021 with COVID-19 losses mostly behind us. We look forward to improving profitability in the P&C Re business as a result of our focus on portfolio quality and the favourable market environment. Our L&H Re client franchise is very strong, positioning us to grow, especially through tailored transactions. On Corporate Solutions, we are well ahead of the turnaround we set for 2021. iptiQ is delivering impressive growth, creating new partnerships and underlining our position as a technology-driven risk knowledge company."
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